The Hospitality Industry Relishes Fiscal Success by Dr. Steven E. Campbell

The hospitality industry is proving to be one of the most successful venues for professional opportunities in the 21^st century, especially for young college graduates.  Employment opportunities abound in response to the booming economy as well as the need to build bigger hotels, establish more up-scale restaurants, and provide additional means of entertainment for the American public.

The hospitality industry in its most general sense implies businesses whose principle mission is to cater to guests.  It is a multi-trillion dollar industry that touches nearly every facet of commerce everyday.  Lodging, travel, and food service are the primary divisions comprising the hospitality industry.

A college graduate can obtain meaningful employment and fulfill career objectives within this ever expanding industry that employs hundreds of thousands of highly paid executive personnel – chefs, general managers, attorneys, economists, art designers, engineers, menu planners, nutritionists, accountants, marketing/sales personnel, architects, and even physicians.

According to Valerie Ferguson, Vice-President and General Manager of the recently opened Loews Hotel in Philadelphia, “The lodging industry offers unlimited employment opportunities for those willing to work long hours and obtain the necessary experience to become a professional hotelier.”

What follows is an economic overview of the three major areas of hospitality commerce mentioned above that may serve as a barometer regarding the health of the industry as it relates to career objectives.

Lodging Industry

Total industry revenue exceeded $99.7 billion in 1999, a 7.1 % increase from 1998 and is predicted to increase 8.1 % to $107.billion in 2000, according to Mark Lomanato, President of Smith Travel Research.  In 1999, a typical U.S. hotel derived two-thirds of its revenue from rooms, while food, beverage, telecommunications, and rental income comprised the remaining one third.

The top money-making U.S. hotels entering the 21^st century are Holiday Inn Hotels, Best Western Hotels, Days Inn of America, Ramada Inn, Super 8, Marriott Hotels/Resorts/ Suites, Hampton Inns/Inn & Suites, Comfort Inns, Hilton Inns/Hotels, and Motel 6.

  Last year many up-scale hotels such as the Hilton, Hyatt, and Marriott were offering weekend packages and dropping rates substantially to fill rooms from Friday to Sunday night.  The average up-scale establishment room rate is $149.00 compared to a limited service establishment such as Hampton Inn or Holiday Inn Express where the average daily room rate is $68.00.  Weekend occupancy was down 2.8% by mid-July 2000 at up-scale hotels.  However, up-scale properties’ weekly rates were up 7.5% from 1999.

One of the primary problems for up-scale hotels is the fact that 56,000 limited-service rooms were added between April 1999 and April 2000.  These properties consisted of 40% of all new hotel rooms constructed.  Dallas, Chicago, and Atlanta are the cities that are adding the most limited-service rooms wherein a consumer can find the best deals.

Because of a strong U.S. economy, Europe had the strongest hotel market in the world as a record number of Americans traveled internationally.  The European hotel market revenue increased a staggering 20% compared to 1999.

Travel and Tourism

As noted above, because of the American economy, Europe had the strongest hotel market in the world during the peak travel months. According to the United States Department of Commerce and European Travel Commission, a record 12 million Americans were expected to have visited Europe last year; with half of that projected number visiting between May-September of 2000.  More amazing was the fact that 25 percent of the number cited were making their first trip abroad.

As a result of the millenniumY2K scare and threats of terrorism, airlines were offering “give-away bargains” to fill planes from November, 1999 to January, 2000. The airline industry suffered a financial loss during what is normally a profitable/high peak travel period.  Conversely, during the summer months last year, domestic and international flights were crowded because of a strong economy, lower airfares, and more available flights. However, unforeseen problems such as severe weather patterns and overcrowded planes and terminals caused numerous delays, cancellations, consumer complaints, and reports of several cases of air-rage (passengers fighting with each other or airline personnel).  United Airlines lost $150 million in the third quarter of 2000 as a result of flight cancellations caused by job actions (unofficial strikes). 

Setting aside the above negative statements, Americans, Europeans, and large groups of tourists from Asia were crisscrossing the world.  Forty-five percent of Canadians took winter vacations.  Their top destinations were Florida, the Caribbean, and Mexico.  Spanish tour officials noted Americans were the fastest rising group of visitors.  Americans’ number one travel destination abroad was London, followed by Paris, and Rome. 

While some took to the sky to travel, others took to the sea.  With the exception of Premier Cruise Lines experiencing insolvency, the cruise industry had reason to celebrate the current economic boom.  The cruise ship industry has increased its vacation destinations 10% over 1999, and expected a record breaking 1.2 million cruise ship guests to cruise European waters in 2000.

Domestically, the Travel Industry Association of America reported 240 million trips (by auto, train, and plane) were taken during the key vacation months of June, July, and August.  The Association notes a trip as one person travelling a minimum of 50 miles or more one way.  In addition, the Association asserted Americans stayed an average of 10 nights versus 8.5 nights in 1999.   AAA vacation cost survey concluded a family of four would spend an average of $213 per day for food and lodging.  The lodging rates last year for the vacationers averaged $108 per night, down $2.00 from two years ago; however, food consumption will average $105, up $2.00 from two years ago.

Food and Beverage

The National Restaurant Association has forecasted substantial growth this decade of $576.9 billion by 2010. This is a staggering $222 billion more than is currently being generated.  Forty years ago the industry only received 25% of consumer dollars.  Within this decade the industry will obtain a 53.2 % share of revenue spent on food.

“The food service industry provides opportunities for career growth and development for managers, culinary professionals and entrepreneurs,” said H. Ray Welch, president of Aramark Healthcare Support Services.  “Aramark is a global leader in providing food service in a variety of settings, including colleges, schools, businesses, stadiums, and healthcare.”

Census forecasts America’s population will be nearly 300 million by 2010.  The 45-54 age group will increase by 6.5 million and the 55-64 age group will increase by 11 million.  Traditionally, these groups spend more monies on food than other age groups.  As the “baby boomers” advance in age, contract feeding at hospitals and nursing/retirement homes will become the fastest growing segment with an annual growth of 8.2 %.  Full service dining sales in 2010 are projected to reach $200 billion or an average increase of 4.9% per year.  Quick service operations are projected to generate an additional $70 billion this decade, up from $110 billion to $181 billion.

Technology will have a unique role with helping the industry meet the figures cited above.  In an effort to reduce labor costs in the food industry, kitchens will become high-tech, computerized models of efficiency.  This will also prevent unnecessary waste, and it will reduce employee theft of inventory.  M.I.T. is currently developing such high-tech kitchens that are predicted to be available to the industry marketplace by 2005.

The industry’s food and beverage sector is seeking to be more competitive in the nation’s $400 billion plus grocery market.  Companies such as McDonald’s, Boston Market, White Castle Hamburgers, Ben & Jerry’s Gourmet Ice Cream, and Nathan’s Famous Hot Dogs have their products on frozen food shelves in numerous retail outlets nationwide.  Sales of ice cream and yogurt at supermarkets were $8 billion.  Frozen breakfast foods, poultry, and fish had sales of $11 billion.  Retail coffee sales were $3.2 billion and packaged pizza $2.8 billion.  The total frozen food sales were close to $25.3 billion, up 5.8% from 1998.

Two African-American executives whose food distribution corporations have profited from the booming hospitality industry are Todd Brown (right) and William “Bill” Williams.  Todd Brown is executive vice president of Kraft Foods, Inc. and president of Kraft Foods Service Division.  Under Brown’s leadership, Kraft Foods Service Division is a $1.4 billion enterprise.

William “Bill” Williams is CEO of Ohio-based Glory Foods and a founding board member of the Black Culinarian Alliance, the nation’s premier organization for minority chefs.  Glory Foods has been cited by Black Enterprise Magazine as one of the top African-American owned businesses with sales exceeding $35 million.  Bill Williams notes, “Many Fortune 500 companies such as Aramark and Marriott are seeking to subcontract to minority-owned businesses.  There are many opportunities for energetic people willing to take the necessary risks.  I highly recommend a young person try his hand in becoming a supplier to these companies.”

Entrepreneur/Diversity

Milford Prewitt, a writer and reporter for Nation’s Restaurant News, the industry’s leading newspaper, notes several hospitality corporations such as AFS Enterprises, Burger King, Advantica, Denny’s, McDonald’s, Tricon Global Restaurants, Church’s Chicken, and Taco Bell are models for other chain restaurants to emulate regarding diversity of ownership of their franchises. Cases in point are listed below.

Noteworthy

Valerie Daniels-Carter is an African-American female who heads V&J Foods, a 145-unit Burger King and Pizza Hut operator in Milwaukee.

Herman Li, an Asian-American operator in Los Angeles, runs 80 Burger Kings in a multi-state territory.

Akinola Olajuwon, brother of Houston Rockets basketball star, Hakeem Olajuwon, has 72 Denny’s in 12 states.

Bridget Chisolm, an African American, is the chief operating partner in a 13-unit, Memphis, Tennessee-based Applebee’s franchise, co-owned with two other African-American entrepreneurs.

Tone Alvarez is a Mexican-American multi-concept and multi-segment operator based in San Antonio.

La-Vann Hawkins' Detroit company has a 140-unit fleet of Burger Kings and Pizza Huts and a Perkins franchise.

Former Los Angeles Lakers star Ervin “Magic” Johnson is the owner of several Starbucks coffee houses.

In the past three decades, several hospitality organizations were formed to fight bias, mentor minority executives as well as provide a solid economic foundation for minority entrepreneurs.

The National Black McDonald’s Operators Association (NBMOA) is approximately 31 years old and has 33 chapters in 32 states with 375 members.  It posted sales over $1 billion dollars in 1999.  Craig Welburn, current owner of eight McDonald's restaurants in the Philadelphia area, currently chairs the organization.

Gerry Fernandez, (right) sales executive with General Mills Corporation, is chairman of the Multi-Cultural Foodservice and Hospitality Alliance (MFHA) and notes, “African Americans represent a $469 billion market and Hispanics represent a $273 billion market or three-fourths of a trillion dollars in economic power.  With those figures, industry leaders should be tapping in to the minority population for managers, customers, and suppliers.”  According to Dr. Ernest P. Boger, (bottom right) director, Hospitality Program at Bethune-Cookman College, “…there have been limited numbers of degree-qualified minority hotel, restaurant or hospitality managers in the developmental pipeline.  Corporate America is now beating down the doors to Historically Black Colleges to interview and hire graduates who typically have over 1,000 hours of practical hands-on experience to complement their degree.  Starting salaries for the class of 2001 will average in the mid $30s.  Some will earn over $50K their first year out if selected for vacation ownership sales management.”

As a result of the institutional bias in the lending and insurance industry toward Asian Americans, the Asian-American Hotel Owners Association (AAHOA) came into existence in 1985 under the name, The Mid-South Indemnity Association.  The Association today boasts a membership of 4,900, who collectively own 15,100 hotels (net worth $38 billion), employ 800,000 Americans, and pay $615 million in property taxes.

Final Thoughts

As the last century ended and the new millennium began, the hospitality industry saw numerous acquisitions and mergers—McDonald Corporation’s acquisition of Donato’s Pizza, Chipotle Mexican Grill and Boston Markets.  Retailer giant Wal-Mart’s acquirement of Ameriserve, Inc. and the Marriott Corporation bought Ritz-Carlton.  Yorkshire Global Restaurants is now the parent corporation of Long John Silver and A&W Restaurants.  The biggest news of a merger was the Nabisco Company being bought out by R.J. Reynolds for some $15 billion in stock and cash. The industry is healthy and expanding rapidly.  Not only will the industry need the traditional workers such as chefs, spa employees and night auditors, but as previously stated, there are needs for CPAs, architects, lawyers, and engineers.  The future will glow for those who desire a long-term professional opportunity in an ever-expanding hospitality industry.

Dr. Steven E. Campbell conducts hospitality seminars throughout America and abroad. He formerly taught hospitality at Cornell University.